Home Stretch

Following the release of a central government guideline in August 2023, local governments and State-owned enterprises have been encouraged to purchase unsold properties and turn them into public housing. By repurposing the country’s bloated inventory of unsold flats, the government is seeking to stabilize the real estate sector while addressing housing shortages for certain groups.　

During the annual National People’s Congress held in March, the government pledged to give city governments more autonomy on how they buy unsold homes, such as deciding the acquisition price and future usage. This marks a broader shift in policy flexibility in tackling the ongoing decline in the real estate sector, which has long served as a major driving force of China’s economy.

Located in the city’s suburban Yangluo District, the Chenjian Shui’an development marketed 980 units as luxury residences with premium interiors and panoramic views. However, since its completion in 2023, only 25 units found buyers.　

The turning point came in December 2024 when Hubei University reached a deal with the project’s developer, Wuhan Construction Group, to purchase 352 units at an average price of 4,650 yuan per square meter – 40 percent off the original listed price.　

The deal is widely considered a winwin: the university solves its chronic student housing shortage at a discount, while the developer gets a 1.98 billion yuan (US$273m) cash injection.　

“This deal breaks the previous model where local State-owned enterprises (SOEs) could acquire existing commercial housing only for public housing,” said Wu Jing, director of the Hang Lung Center for Real Estate at Tsinghua University.　

“Such approaches offer new perspectives for housing acquisitions that align with this year’s policy direction,” Wu said, “A more flexible housing acquisition policy will help address various problems we’ve seen in the past.”　

Some 500 kilometers to the northeast in Zhengzhou, capital of Henan Province, a different but equally successful model is underway. Zhengfa Jiayuan Meiyu development – originally built as luxury apartments by publicly listed developer China Resources Land – now houses 2,380 young professionals in meticulously refurbished units that rent for about 30 percent below market rates.　

Ma Yueqiao, a 29-year-old graphic designer, was among the first tenants when he moved into his 30-squaremeter studio in November 2023. “The transformation has been remarkable,” he says, gesturing toward the bustling courtyard below his window. “When I arrived, this area felt like a construction site – unfinished buildings, dust everywhere, no amenities. Now we have proper grocery stores, delivery stations and even an EV charging station,” Ma told NewsChina, “It’s become a real neighborhood.”　

This is one of many similar projects in the city. As of January 2025, SOEs backed by Zhengzhou government had acquired 96 housing projects, comprising 125,000 units, the highest acquisition volume nationwide. This includes 63 apartment projects with 86,000 units for working professionals, with an overall 99 percent occupancy rate.

“When repurposing acquired homes into subsidized housing, the SOEs as buyers aren’t required to turn a profit, but they can’t operate at a loss either, which sets high standards for the properties they purchase,” said Li Yujia, chief researcher at the Guangdong Urban Rural Planning and Design Research Institute. “In first-tier cities, properties that meet such criteria face no shortage of buyers, while projects in areas with weak demand or leftover unsold units from scattered developments fail to qualify,” he told NewsChina.　

While subsidized housing is sold or let typically at 40-50 percent below market price, SOEs must negotiate steep discounts from developers, which further dampens real estate developers’ enthusiasm.　

“Many of these properties are held by publicly traded developers who prefer gradual sales as long as they don’t face cash flow crises. If they were to sell at heavily discounted prices, they would have to immediately disclose their substantial losses on corporate balance sheets,” Li said, “The result is that these companies lack incentives to participate.”　

Wu stressed the regional mismatch between supply and demand. While demand for subsidized housing is primarily in first- and second-tier cities, most unsold commercial housing inventory targeted for acquisition is concentrated in third- and fourth-tier cities.　

“Despite many cities expressing support for the acquisition initiative, the actual volume of purchases has been limited and fallen short of expectations,” Wang Yeqiang, a researcher at the Chinese Academy of Social Sciences and deputy director of the National Laboratory for Future Cities, told NewsChina.　

In May 2024, the People’s Bank of China, China’s central bank, announced a 300 billion yuan (US$41.2b) relending facility to support the government-subsidized housing project.　

According to Huatai Securities, by the end of November 2024, approved loans for implemented projects were about 43.5 billion yuan (US$5.9b), accounting for only 14.5 percent of the total relending quota. Excluding the 41.2 billion yuan (US$5.6b) in deals already sealed in eight pilot cities before May 2024, newly implemented financing had been as low as 2.3 billion yuan (US$320m).

Experts believe that one of the most effective applications of unsold inventory is to provide housing for displaced residents in urban village redevelopment and historic neighborhood renewal projects. As these projects once relied on time-consuming new construction, purchasing existing unsold homes offers a faster, more cost-efficient alternative.　

Some local governments have already put it into practice. In Guangdong Province, the city of Foshan provided residents displaced by suburban village development projects with multiple options, including property exchanges, cash compensation or a hybrid approach. Ten pre-existing housing communities were offered as relocation options, seven of which were repurposed from existing inventory.　

In Luoyang, Henan Province, officials introduced even more progressive measures. The city’s 2025 work plan released on March 11 includes 19 urban village redevelopment projects and 110 neighborhood renovations. More importantly, Luoyang has implemented a “purchase instead of build” policy that introduces three novel approaches: housing vouchers, voluntary purchase programs and bulk acquisitions. The new model utilizes existing housing stock to meet resettlement needs, a significant shift from traditional construction-based solutions.　

Considering that many local governments are deploying such tools to stabilize falling property markets and facilitate the recovery of the real estate sector, the new approach could simultaneously speed up redevelopment projects and reduce housing inventory.　

Another application targets elderly care. With China’s aging population creating unprecedented demand for senior housing, converting unsold properties into care facilities presents a practical solution.　

Hainan Province is pioneering this approach. In March, the provincial government launched a three-year (2025- 2027) action plan to develop a “healthy aging industry.” A major highlight is reusing vacant residential properties for elder care purposes, provided they meet safety and operational standards.　

In Wuhan, where unsold apartments are being transformed into university dorms, the city government is trying to replicate the model in the health sector. In February, Wuhan No.6 Hospital started expanding its Panlong District branch, which involves buying 32 floors of the Tianzongcheng Enterprise Center, a mostly empty commercial building. With a 1 billion yuan (US$137m) investment, the building will be renovated into medical facilities, including outpatient, emergency and inpatient departments, with a planned capacity of 500 beds.　

These trials of repurposing unsold properties for public amenities open the door for non-real estate developers or non-State-owned businesses to become potential buyers. By exploring alternative ways to acquire and repurpose unsold properties, local governments aim to leverage this inventory to address social problems like eldercare and healthcare.　

In the meantime, the central government has pledged to strengthen financial support. In October 2024, China’s Ministry of Finance proposed using special-purpose bonds to purchase unsold commercial properties as subsidized housing, with officials currently finalizing implementation details. The initiative gained further momentum in this year’s government work report, which pledged 4.4 trillion yuan (US$606b) in local government special bonds, including funds specifically earmarked for buying excess housing inventory.　

“Expanding local autonomy creates testing ground for new solutions,” said Wu Jing, “The special bonds are designed to set these innovative models into motion.”　

He cautioned, however, that program success hinges on balanced supply-demand dynamics, noting that all approaches, whether conventional or experimental, will require navigating complex market realities.